Governor Bevin’s pension consultant produced a report and recommendations last week that set off a firestorm of worry, uncertainty and mass retirements from a proposal that significantly cuts to pension benefits promised to Kentucky’s current and future retirees.
It is abundantly clear that it is the responsibility of the General Assembly to adjust the public pension system in the fact of our fiscal responsibilities. I take this responsibility seriously and it is reflected in the many changes enacted over the past decade that impacted new hires and some current staff in the state and county systems, as well as in the teachers’ system. For the experienced, long-term state workers, we must come together to fund and stabilize the benefit program that seniors and retirees are counting on.
Law enforcement, firefighters, EMTs, teachers, highway workers and all public servants made career decisions to serve the public, many for reduced wages, believing that at the end of their careers, they could be confident in a secure retirement. These folks are our family members, our friends and neighbors. They have taken pride in their service to the citizens of the Commonwealth.
Rep. Dennis Keene
Before taking the drastic step of adopting any of the consultant’s recommendations to fund the pension liability on the backs of those who paid into the system and earned their retirement, let us first look at the facts:
There are currently 102,724 in retirees drawing benefits in the KERS/
CERS retirement system and 51,563 drawing from the Teacher’s Retirement System.
The average annual benefit for KERS retirees is $20,633 and for CERS retirees it is $11,264.
The average annual benefit for teachers is $37,368, but also keep in mind they do not receive Social Security as the KERS/CERS members do, and they are not eligible for spousal survivor benefits.
Some Kentucky retirees do receive in excess of $80,000 per year, but the fact is they only amount to 0.6% of all public retirees.
Every year the KERS/CERS retirement systems pay out $1.9 billion in benefits, and of that amount $1.8 billion stays in Kentucky’s economy.
The Teachers’ Retirement System also pays out $1.9 billion annually.
Every $1 paid out in pension benefits creates $1.43 in economic activity.
Closing down these systems and forcing current employees into a 401(k)-style plan will have devastating impacts on the economy.
Unsustainable benefits are not the cause of underfunding in the pension systems. The consultants generally determined that there were several components creating the shortfall, including actual investments underperforming when measured against the market, longer life expectancies and more clostly hiring and separation patterns, and flat-to-declining payroll when contributions were based on a percentage of total payroll, just to name a few. We have also discovered that poor and risky investment practices, lack of transparency and less-than-competitive investment management contracts in the retirement funds have resulted in higher fees and less return.
The bottom line is Kentucky has paid a bunch of consultants a lot of money to fix the problems, and their only plan is to cut benefits from those who can least afford it and who should not be asked to bear the burden of mismanagement.
A special session to deal with pensions has not happened yet because there is no political will to make the recommended benefit cuts but also no plan to deal with the shortfall. Representative Rick Rand and I have been working on a plan that would yield much-needed revenue to support the pension system, and I look forward to this legislation receiving a hearing and vote during the upcoming session.
Meanwhile, our children are back in school and our teachers deserve the peace of mind of knowing they will receive the benefits they have paid for week after week and year after year. I ask that my colleagues put past issues aside and work together in creating a new revenue stream for meeting the pension shortfall; taking a hard look at creating equity in the systems, and beginninh to start fresh with a plan that is sustainable in the years to come.
Representative Dennis Keene has served the citizens of the 67th District (Newport, Bellevue, Dayton, Silver Grove, Melbourne, Highland Heights, Southgate, and Wilder) in Campbell County since 2005. He served as chairman of the House Licensing and Occupations Committee for eight years, and currently serves on that committee as well as serving on Banking & Insurance and the Natural Resources & Energy Committees. Keene is an economic development advisor for EGC Construction. For more information, visit: www.DennisKeene.com.
